Livni says Kadima lost way under Olmert

By Allyn Fisher-Ilan

JERUSALEM (Reuters) - Israeli Foreign Minister Tzipi Livni stepped up a campaign to oust Prime Minister Ehud Olmert, charging on Monday that their centrist Kadima party had lost its way under his leadership.

Livni, a favourite in public opinion polls to succeed Olmert, whose tenure has been threatened by a series of corruption probes, spoke at a rally in Jerusalem ahead of a party leadership vote scheduled for mid-September.

"The sense of hope that had been a part of the establishment of Kadima has been lost along the way," Livni said, according to a transcript of her remarks released by a spokesman on Monday.

The Kadima party was founded by former Prime Minister Ariel Sharon in 2005 after Israel's pullout from the Gaza Strip split his rightwing Likud party. Olmert took over in January 2006 when Sharon fell into a coma after a stroke.

Livni heads to Washington on Tuesday for talks with Palestinian negotiator Ahmed Qurie and U.S. Secretary of State Condoleezza Rice, who is pressing the sides to reach a peace deal before President George W. Bush's term ends in January.

Israeli Channel 2 television reported on Monday night that three of Sharon's close aides had opted to advise Livni as she contests the Kadima party leadership.

Police investigations of Olmert have weakened his political authority. Accused of accepting cash-stuffed envelopes from a U.S. fundraiser and making duplicate claims for travel expenses, Olmert denies wrongdoing, but says he will resign if indicted.

Livni told the party forum she was not sure the U.S. aim to reach an Israeli-Palestinian peace deal this year could be met.

"The best efforts will be made to meet the 2008 target, but what is most important is the issue of substance," a Livni aide quoted her as saying.

Livni said Israel favoured the establishment of a Palestinian state on land now occupied by Israel, but objected to demands for Palestinian refugees to return to their former homes in what is now the Jewish state, a key issue in the negotiations.

Livni first called for Olmert to resign a year ago when a commission faulted his handling of the 2006 war with Lebanon's Hezbollah guerrillas.

If she defeats Olmert, who has still not announced whether he will stand in the party vote, Livni, a former Mossad intelligence operative, could become Israel's first woman prime minister since the late Golda Meir in the early 1970's.

But Livni could face a tough challenge in any leadership contest from Shaul Mofaz, transport minister and former defence chief known for his tough tactics in crushing a Palestinian uprising that erupted after peace talks failed in 2000.

Olmert may be forced to resign if Kadima elects a new leader. That could trigger an early national election if his successor failed to forge a new coalition government. The next scheduled general election is in 2010.

Olmert's government also saw off eight no-confidence motions in parliament on Monday, the last of many during the current session before the summer recess begins at the end of the week.

(Writing by Ori Lewis; Editing by Giles Elgood)